Are you one of those investors who wants to learn how to trade stock options, but doesn’t know where to start? Or maybe you are just a little afraid of them?

Those are legitimate concerns, but after you learn to trade options, you will soon discover how simple they really are. I always tell people this, if you can learn how the stock market works, then you can certainly learn how to trade stock options. But you must know how the stock market works before you can trade options — there is just no getting around that.

Let’s talk about the good things that stock options can offer you. First, they give you leverage as you can control large amounts of stock for a fraction of the price. And if that stock makes a big move, then you will profit from it as it you bought the stock itself. Secondly, if the stock makes a big move against you, then your loss is limited to the price of the option and that will never change. Finally, stock options are a great way to supplement your return on investment when you sell them. However, keep in mind that selling options is a very advanced strategy.

Now let us look at the bad things about trading stock options. The biggest disadvantage is that options are a decaying asset. As soon as you purchase a stock option, it begins to lose value. Of course, when the underlying stock makes a big move, then the option’s value grows as well, but if the stock doesn’t make a move, then the option’s value decays. Secondly, you have to ensure that the option market you are considering has sufficient liquidity. Surprisely, even very liquid stocks will not offer a liquid option market. If the option market lacks liquidity, then you will get a terrible fill on your market orders.

Now let us examine some great resources that will help us learn how to trade stock options.

How to Trade Stock Options with Kirk Du Plessis — YouTube

Learn what options are and why trade them, strategies that are conservative and Kirk’s real experience with the real estate tax cycle increasing.

Learn To Trade Stock Options — Volatility and Greeks Explained

This stock option education video was given to all subscribers because the Chicago Cubs won the World Series. Tp trade stock options correctly you need to use volatility — delta, gamma, theta, straddles, covered calls, and other stock options strategies are covered

The post Learning How to Trade Stock Options appeared first on Investing Insight.